Acquiring ownership interests in 92 ambulatory surgery centers
• Includes formation of five-year partnership and development agreement between
USPI and SCD to provide continuity for SCD platform and future de novo
development projects
• Builds on USPI’s position as a leading ambulatory surgery platform and partner of
choice for high-quality, multi-specialty physicians, including musculoskeletal,
ENT and others
• Positions Tenet to generate strong financial returns, including attractive EBITDA
margins and free cash flow
• Management will host a conference call today, Nov. 8, at 5:30 p.m. Eastern Time
(4:30 p.m. Central Time), to discuss the transaction
November 8 2021 – Tenet Healthcare Corporation (NYSE: THC), and its subsidiary United
Surgical Partners International (USPI), today announced that they have entered into a definitive
agreement with the principals of SurgCenter Development (SCD) to acquire SCD. Under the
terms of the agreement, Tenet/USPI will acquire SCD’s ownership interests in 92 ambulatory
surgery centers (ASCs) and other related ambulatory support services (collectively, the Portfolio).
USPI and SCD’s principals will also enter into a five-year partnership and development agreement
designed to provide seamless continuity and support for SCD’s facilities and physician partners
over the coming years. Going forward, USPI also has the exclusive option to partner with SCD on
de novo development projects over the life of the agreement.
The transaction follows USPI’s successful acquisition of 67 SCD centers since 2009.
“We are extremely pleased to announce this transformative transaction and partnership, which
builds upon USPI’s position as a premier growth partner and SCD’s track record of developing
high-quality centers with leading physicians,” said Saum Sutaria, M.D., CEO of Tenet Healthcare.
“By welcoming these centers into our company, USPI will maintain its reach as the largest
ambulatory platform for musculoskeletal services, a high-growth service line. We are also creating
a pathway for further expansion through a partnership that pairs the expert development and
operational capabilities of our two organizations.”
“SurgCenter was founded on a commitment to empower leading physicians by developing highly
efficient facilities – for three decades, we have not wavered from that commitment and plan to
continue to do the same long into the future,” said Gregory George, M.D., Ph.D., Co-Founder of
SCD. “Our relationship with USPI is now well into its second decade. The partnership that we
announced today extends that relationship and allows us to continue to support our current
physician partners by leveraging the best aspects of both USPI and SCD, while we remain
committed to developing de novo centers which put physicians, safety and high-quality care at
the center of the patient experience.”
“We are looking forward to adding another portfolio of high-quality, well-established SCD centers,
as well as those in various stages of development,” said Brett Brodnax, President and CEO of
USPI. “This transaction came together because of our shared commitment to quality, safety and
delivering an industry-leading experience for our patients and physicians alike. We are excited to
continue our longstanding relationship in partnership with the SCD principals, who have an
extremely effective development engine to expand our network of care.”
Acquiring ownership in MSK-focused ASC portfolio
Tenet/USPI will acquire SCD’s ownership interests in 92 ASCs and related ambulatory support
services for approximately $1.2 billion. SCD owns a minority interest of approximately 39 percent
on average in 86 of the ASCs and a majority interest of approximately 55 percent on average in
six of the ASCs. Tenet plans to finance the transaction through the issuance of first-lien secured
notes. The transaction is expected to close in the fourth quarter of 2021, subject to customary
approvals and closing conditions.
Additionally, in the coming months, USPI plans to offer to acquire a portion of equity interests in
the ASCs from physician owners for incremental consideration of up to approximately $250
million. Assuming successful completion of the acquisition of physician interests, Tenet will
consolidate the results of the centers in which USPI holds a majority ownership position in its
financial statements.
The centers to be acquired are located in 21 states, offering USPI expansion into high-growth
regions in Arizona, Florida and Texas; adding density in relatively newer markets in Ohio, Indiana,
Wisconsin and Maryland; and providing a scalable entry point in Michigan. The Portfolio includes
65 mature centers, as well as 27 that have either opened within the last year or will start to perform
their first cases in 2022.
The case mix of the centers has an attractive distribution among several service lines where USPI
has demonstrated expertise, including approximately 80 percent in musculoskeletal care, such
as total joint and spine procedures. This complements a robust service offering within USPI’s
broader platform in the areas of gastroenterology, ophthalmology, ENT, general surgery and other
specialized procedures.
Following the addition of the Portfolio, USPI will have more than 440 facilities in 35 states.
Continuation of relationship with SCD through new ASC development partnership
With the development of more than 200 centers since its formation in 1993, SCD expects to build
on that trajectory with de novo ASCs and this new partnership with USPI.
The terms of the transaction include entry into a new development agreement under which USPI
will partner with SCD on the future development of a minimum target of at least 50 centers over
a period of five years. The development of these new centers will generally be led by the same
group of SCD principals responsible for the growth and success of the Portfolio to date. With each
center, USPI will have the exclusive option to obtain an immediate ownership position at the time
of development with an additional option to purchase SCD’s ownership stake 18 months after the
opening of such facilities.
In addition to the partnership between SCD and USPI for future de novo facilities, USPI anticipates
continuing to execute additional acquisitions and de novo developments in partnership with
physicians and health systems, while consistently delivering attractive organic growth.
Financial profile
The transaction will further diversify Tenet’s mix of Adjusted EBITDA with a larger portion being
produced by its higher-margin ambulatory portfolio. Tenet expects the transaction to generate
strong financial returns, including enhanced Adjusted EBITDA margins and free cash flow. The
Company expects to realize at least $45 million of annual run-rate synergies over the next three
to four years from the transaction
